Scaife children’s lawyers make bid for punitive damages

Trustees to a drained family fund could face a punitive damages claim if a judge rules in favor of the daughter and son of the late billionaire publisher Richard Mellon Scaife.

While it’s rare for Pennsylvania courts to hit trustees with punitive damages, attorneys for Jennie Scaife, 53, of Florida, and David Scaife, 50, of Shadyside, contend that state law doesn’t rule it out, and that numerous other states explicitly allow such punishments when fiduciary duties are breached.

“The modern trend for addressing this issue is to permit [punitive damages],” attorney William Pietragallo said during court arguments Thursday. He represents Jennie Scaife and presented a list of 14 states in which that has occurred.

“Until you sit as a trial court in any one of those 14, your decision has to be based on Pennsylvania law,” attorney Samuel Braver, representing trustee PNC Bank, told Allegheny County Common Pleas Judge Kathleen A. Durkin. Pennsylvania law says trustees must restore lost money but is “not penal,” he said.

The arguments before Judge Durkin followed five months of dueling legal briefs on the subject of whether state law allows for the imposition of punitive damages

against trustees. That’s one of many points of dispute in a 2-year-old court fight pitting the Tribune-Review publisher’s daughter and son against three trustees who governed a fund set up in 1935 by the pair’s grandmother.

The trustees were H. Yale Gutnick, who also chaired Trib Total Media and whose law firm served the TribuneReview newspapers and their publisher; James M. Walton; and PNC. Over 20 years, they allowed Richard Mellon Scaife to withdraw some $450 million from the fund, of which more than $400 million went to support his media holdings. Had there been any balance upon his 2014 death, the daughter and son would have inherited it.

The central question is whether the funds supported the publisher’s “welfare,” as the trustees contend, or were “wasted,” as the daughter and son argue. The Scaifes seek reimbursement from the trustees and want to add punitive damages, based on 37 documents that so far have remained under wraps because the trustees view them as confidential.

The daughter and son won a round Tuesday, when Superior Court affirmed Judge Durkin’s decision that Trib Total Media must turn over 24 years worth of detailed financial records. Trib Total Media, which has argued that release of the records could be devastating to its business, has 30 days to appeal to the state Supreme Court.

The documents could show that the trust fund money “was going into a deep well, from which there was no hope of it reaching light on the other side,” Mr. Pietragallo said.

The Post-Gazette and The Philadelphia Inquirer have intervened in the case, contending that its filings should be presumed to be public. A separate case, in Westmoreland County, in which Jennie Scaife is challenging the validity of her father’s will, is on hold during settlement negotiations.